Martinez Companys produces between 7,500 and 12,500 units. When producing 10,000 units: - The total product cost to make 10,000 units is $209,500. - The total period costs to sell 10,000 units is $27,000. - The variable cost per unit is $12.15. - The fixed manufacturing cost per unit decreases as production increases, from $5 at 8,000 units to $3.20 at 12,500 units.

1. Martinez Companys relevant range of production is 7,500 units to 12,500 units. When it
produces and sells 10,000 units, its unit costs are as follows: Amount per Unit Direct Materials
$5.70, Direct Labor $3.20, Variable manufacturing overhead $1.60, Fixed Manufacturing
overhead $4.00, Fixed selling expense $2.70, Fixed administrative expense $2.10, Sales
Commissions $1.10, and Variable administrative expense $0.55.
1.)For financial accounting purposes, what is the total amount of product cost incurred to make
10,000 units?
2.)For financial accounting purposes, what is the total amount of period costs incurred to sell
10,000 units?
3.)If 8,000 units are sold, what is the variable cost per unit sold?
4.)If 12,500 units are sold, what is the variable cost per unit sold?
5.)If 8,000 units are sold, what is the total amount of variable costs related to the units sold?
6.)If 12, 500 units are sold, what is the total amount of variable costs related to the units sold?
7.)If 8,000 units are produced, what is the average fixed manufacturing cost per unit produced?
8.)If 12,500 units are produced, what is the average fixed manufacturing cost per unit produced?
9.)If 8,000 units are produced, what is the total amount of fixed manufacturing cost incurred to
support this level of production?
10.)If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to
support this level of production?
11.)If 8,000 units are produced, what is the total amount of manufacturing overhead cost
incurred to support this level of production? What is the total amount expressed on a per unit
basis?
12.)If 12,500 units are produced, what is the total amount of manufacturing overhead cost
incurred to support this level of production? What is the total amount expressed on a per unit
basis?
13.)If selling price is $22 per unit, what is the contribution margin per unit sold?
14.)If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing
costs incurred to support this level of production?
15.)What total incremental cost will Martinez incur if it increases production from 10,000 to 10,
001 units?
Solution
1. Total Amount of Product Cost incurred to make 10,000 units =
(5.7+3.2+1.6+4+2.7+2.1+1.1+0.55) x 10000

2. = $209,500
2. Total Amount of Period Costs incurred to sell 10,000 units = Fixed Selling Expense of $2.7 x
10000 = $27,000
3. If 8,000 units are sold, the variable cost per unit sold = 5.7+3.2+1.6+1.1+0.55 = $12.15
4. If 12,500 units are sold, the variable cost per unit sold = 5.7+3.2+1.6+1.1+0.55 = $12.15
5. If 8,000 units are sold, the total amount of variable costs related to the units sold = 12.15 x
8000 = $97,200
6. If 12,500 units are sold, the total amount of variable costs related to the units sold = 12.15 x
12500 = $151,875
7. If 8,000 units are produced, the average fixed manufacturing cost per unit produced = 4 x
10000/8000 = $5
8. If 12,500 units are produced, the average fixed manufacturing cost per unit produced = 4 x
10000/12500 = $3.2
9. If 8,000 units are produced, the total amount of fixed manufacturing cost incurred to support
this level of production = 8000 x 5 = $40,000
10. If 12,500 units are produced, the total amount of fixed manufacturing cost incurred to support
this level of production = 12500 x 3.2 = $40,000